Lecture-3-RTAs.pdf - Regional Trade Agreement 1 DEFINITIONS...

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Regional Trade Agreement
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CONTENTS § Definitions § Characteristics § Levels § Why country forms RTAs § Impacts § FTAs and WTO 1 DEFINITIONS
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Definitions § Free trade areas are part of the broad category of trade arrangements under which member- countries grant one another preferential treatment in trade § Preferential trade arrangements include the following: 1. free trade areas (FTAs), 2. customs unions, 3. common markets, 4. economic unions, 1 DEFINITIONS
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Definitions § Regional groups: NAFTA, AFTA § Trans-regional groups: Asia-Pacific Economic Cooperation (APEC) § Inter-regional arrangements: EU & MECOSUR (grouping Brazil, Argentina, Paraguay, Uruguay and Venezuela) , ASEAN & ANZCERTA ( Australia – New Zealand Closer Economic Relations Trade Agreement) 1 DEFINITIONS
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Characteristics § Reducing trade barriers à connecting markets § Regional Trade Agreement ~ Discriminatory Trade Agreement 1 DEFINITIONS
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§ The process of forming an FTA usually begins with discussions between trading partners to ascertain the feasibility of forming an FTA. § If they agree to go forward, then the countries undertake negotiations on what the FTA would look like. § At a minimum, participants in an FTA agree to eliminate tariffs and some other nontariff trade barriers and agree to do so over a specific time period. § The size and complexity of the FTA will largely reflect the size and complexity of the economic relations among the participating countries. 1 DEFINITIONS Characteristics
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§ In addition, the partner countries usually agree on rules of origin, that is, a definition of what constitutes a product manufactured within the FTA and, therefore, one that is eligible to receive duty- free and other preferential trade treatment. § Rules of origin prevent products from nonmembers entering an FTA market over the lowest tariff wall. § Most FTAs also include procedures on the settlement of disputes arising among members and rules on the implementation of border controls, such as product safety certification and sanitary and phytosanitary requirements. § Most recent FTAs contain rules on economic activities besides trade in goods, including foreign investment, intellectual property rights protection, treatment of labor and environment, and trade in services. 1 DEFINITIONS Characteristics: Rules
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Characteristics: The Debate Over FTAs § The differing views can be categorized into three main groups: 1. oppose FTAs because, they assert, FTAs undermine the development of the multilateral trading system and act as a “stumbling block” to global trade liberalization. 2. supports FTAs because, they believe, FTAs act as a “building block” to multilateral trade liberalization. 3. opposed to trade liberalization in general because they believe its impact on workers in import- sensitive sectors or on the environment is unacceptable.
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